Last week's news that GE's NBC unit is cutting back on providing programming in the 8-9PM time slot, and engaging in large-scale cost-cutting as well, seems to be a confirmation that network media companies are in serious trouble.
It appears now that GE's Bob Wright, the executive in charge of NBC and Universal, is presiding over the network's shrinkage, including its news department. While these moves may eventually boost profitability, they seem to be doing so by reducing revenues. My research found that one of the keys to a company's ability to consistently outperform the market, in terms of total return, is to consistently grow revenues at consistently superior rates.
With its entertainment unit retrenching and cutting costs and programming, it would seem to be a drag on GE's ability to grow revenues at consistently superior rates into the near future.
That's the financial aspect of the changes occurring now at NBC.
The behavioral dimension gets to the larger issues of a network's future in the evolving world of multiple, digital channels and applications devices for media consumption. I recently wrote about this here.
By abdicating an hour of prime time to reality shows, to save money, while cable networks like Fox produce quality drama series such as "House," NBC is, in effect, signaling that, as an old media network, it simply can't afford to compete in that product/market space anymore.
In a recent post here, I discussed the content/distribution issue for the evolving media sector. In some ways, I think GE/NBC-Universal may now be the most disadvantaged of all of the media properties.
Disney, ABC's parent, is a media/entertainment company. At least their funding and strategic tradeoffs all involve the same type of 'product.' CBS is now a standalone firm again, and what was left with Viacom is, like Disney, an all-media firm. Again, like products among which to make strategic decisions.
The various cable media, such as TW, Fox, and the new hybrid WB-UPN, are all media enterprises.
GE refits locomotives, makes white goods, jet engines, and, oh yes, owns media properties- a broadcast network and some related cable programs, and a movie studio with theme parks .
Can you imagine trying to set budgetary and strategic guidance among that mess? As I wrote here recently, I think it's simply a mistake for GE to continue its existence.
If I had to guess, I'd say that NBC/Universal is perhaps one of the most hindered units among GE's portfolio, when it comes to laboring under financial and operating constraints as part of the parent firm. It has to compete internally for capital, while competing externally with a fair number of pure media companies run by fairly talented, motivated indivduals.
That's why I see last week's announced cutbacks at NBC a harbinger of its eventual impairment, due to being a part of a non-media conglomerate. If I'm correct, more shrinkage will follow, perhaps, eventually, mercifully, by a spinoff or sale of the unit to another media concern.
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2 comments:
Is this just more corporate greed by demanding that ALL GE groups meet fiscal goals that are not congruent with the specific business? Not every facet of a corporation can grow at the same "Wall Street Expectations" every year.
Don-
Thanks for your comment.
I don't know that each GE group is held to the same performance goals in terms of percentage increase year-year.
However, my point was that NBC-Universal has to compete against non-entertainment operations for capital and funding, but must compete externally to earn revenues. The internal exercise has no impact on the external, and vice versa. So there could be a tremendous oppty to gain share and revenues, but the internal mechanisms might not fund them.
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